California Real Estate Practice Exam

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Master the California Real Estate Exam with our comprehensive practice quiz. Get expert tips, detailed content review, and insider strategies to pass on your first try.

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At what point will a buyer stop paying for PMI on a property purchased for $260,000 with 100% financing?

When he has paid off $26,000
When the property value increases
When he has paid off $65,000
After 5 years of payments

The correct answer is: When he has paid off $65,000

A) When he has paid off $26,000 This option is incorrect because PMI (Private Mortgage Insurance) is typically required when a buyer does not have a down payment of 20% or more. So, in this scenario, the buyer has 100% financing and therefore will be required to pay PMI. B) When the property value increases: This option is incorrect because PMI is based on the original purchase price of the property, not the value of the property over time. D) After 5 years of payments: This option is incorrect because the length of time for paying PMI can vary and is not necessarily tied to a specific number of years. It is based on the remaining balance on the loan and when the buyer reaches a certain loan-to-value ratio. In this scenario, it is when the buyer has paid off $65,000, or 25% of the original purchase price.